Cuts OK'd to reduce expected shortfall

AUSTIN — State leaders facing a budget shortfall announced $1.2 billion in cuts Tuesday, trimming such expenditures as Medicaid reimbursement rates for doctors but sparing areas including state psychiatric hospitals and most of the budget for prisons.

Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Joe Straus, R-San Antonio, had asked state agencies to identify savings because of a looming budget gap through the next two-year fiscal period. Some put the shortfall as high as $18 billion.

The agencies had offered an estimated $1.7 billion in their current budgets, based on targets set by the leaders. With Tuesday's exemptions, savings amount to $1.2 billion.

“Every penny we save now in the 2010-11 biennium is one penny closer to balancing the budget in the next legislative session,” Perry said in a statement.

Among cuts approved by the leaders is a drop in reimbursement rates for doctors and other health care providers who treat Medicaid patients, a move that doctors and advocates for lower-income Texans say would discourage providers from taking new Medicaid patients.

Some also have expressed concern because a cut in spending on human services programs means the loss of federal matching funds. The $205 million in overall cuts at health and human services agencies, including the reduced reimbursement rate, will cost an estimated $190 million in federal matching funds.

Prison officials had asked for exemptions from cutting items such as correctional officer positions and treatment programs, saying slashing those areas could hurt prison security and make it more likely offenders would commit new crimes when released.

The leaders granted the exemptions. Cuts approved for prisons include unspent balances, money that was allocated for a facility whose opening has been delayed, and an initiative to hold down travel and overtime.

Among other savings, Perry identified $21.5 million in general revenue spending cuts in his office, the bulk of it $20 million from the Texas Enterprise Fund, which he has touted as a valuable tool to lure business to the state.

Perry, who said he wanted to lead by example, continues to champion the fund. Critics have questioned his use of it, and his challenger in November's election, Bill White, is calling for an audit of it.

Items spared from cuts, besides prison programs, included hospital beds at the San Antonio, North Texas, Rusk and Terrell state hospitals. Human services officials had estimated the option would mean an estimated 1,447 fewer patients receiving services through fiscal year 2011.

The Texas Education Agency had offered to eliminate $1 million in state funding to the University Interscholastic League for a steroid testing program, among other cuts. Testing has found few students using steroids, but Dewhurst has championed the program, and leaders kept intact $750,000 of the money.

“We cannot afford business as usual, but must make tough choices and put every cost-savings idea on the table,” Straus said in a statement. He has told House budget-writers to close the budget gap without new taxes.

Dewhurst said in a statement that “by tightening our belt just like millions of families and Texas businesses are doing every day across the state, we will help ensure Texas' economy remains the strongest in the nation, while protecting the most vulnerable Texans, promoting job growth and job creation, and keeping all Texans safe.”